Ready To Purchase Home Insurance? 3 Things You Need To Consider
When you purchase a home, you also need to get home owner's insurance for your home as well. Home owner's insurance is how you protect the big investment you just made.
Understand the Difference Between Replacement Cost and Actual Cash Value
When it comes to purchasing home insurance, there are two ways that the insurance will pay you back if something happens to your home. You can be paid the actual cash value of your home and belongings or you can be paid the replacement value. These can be really different values, so it is important to understand the difference between the two.
For example, it may cost you $100,000 to rebuild your home from the ground up, but the current market value you can get for your home may be $250,000. Alternatively, the current market could be really depressed, and the cost to rebuild your home could be $100,000 and the market value of your home could only be $60,000. That is why it is not easy to say that you should just go for replacement value or for actual cash value coverage.
The truth is that the type of repayment option you choose, cash-value or replacement, should be based on current market conditions. That requires you to have a basic idea of the cost to rebuild your home and the current market value of your home. You want to go with the type of coverage that provides you with the most money.
On some policies, you can go for a different compensation method for your home and for your personal belongings. When it comes to your personal belongings, the replacement value may be better than the current market value. For example, a shirt that you bought for $50 may only be worth $10 now, but to replace it with a similar item you would need to spend $55. That is why replacement cost often works out best with personal property.
Consider What Type of Deductible You Can Afford to Pay
The deductible you carry can have a big impact on what you pay for your premium. Although it may seem like a good idea to go with a small deductible, the truth is that a small deductible usually equals a larger premium. However, you also want to make sure you can afford to pay your deductible or could access money to pay it if you should experience an emergency. The deductible amount should be a balance of what you can afford to pay for a premium and in the case of an emergency. You should strive to save up so you always have the cash on hand to cover the deductible should you need to.
Find Out What Additional Types of Coverage You May Need
Finally, make sure your insurance covers all the types of events that could damage your home. For example, if you live in an area that floods, you need to purchase separate flood insurance. Check with your insurance agent, and see what types of extra coverage are common for your area.
When it comes to purchasing home insurance, you need to make sure you know the difference between replacement cost and actual cash value coverage. You need to choose a deductible that you can pay to afford in the event of an emergency. You also need to make sure you know what type of coverage you need and make sure your policy includes that type of coverage.
Contact your insurance agent to learn more about homeowner's insurance.
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